Calls grow to lift burden of Germany's solidarity tax

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The Independent Online

It is as hated as the Berlin Wall, the Stasi secret police and the decade-long waiting list for a new Trabant. But, unlike those symbols of the former East Germany, the "solidarity tax", introduced after reunification of the country, is still causing pain and anguish.

Levied on all Germans, it was meant to restore a decrepit state to the levels of the prosperous West. For those saddled with paying up, it often seemed the equivalent of throwing money at an alcoholic to keep the bar open.

While providing perfect autobahns, restored railway stations with lovely flower-beds, subsidised housing and ammunition for neo-Nazis, the billions in "soli tax" money has failed significantly to lift the former Communist state out of its economic and social torpor.

The former chancellor Helmut Kohl promised it would be around for a year or two. But, 16 years later, Germans are still forking out the 5.5 per cent surcharge on their incomes to pay for the reconstruction of a blighted zone.

The government insists the tax must stay because the region still needs help against high unemployment, falling investment and an exodus of the young. It is, consequently, enshrined in law until 2019 at least.

The unpopularity of the tax looks set, however, to force a review. Volker Kauder, an MP in the Christian Democratic party (CDU) of the Chancellor, Angela Merkel, bowed to growing media pressure and confirmed that the government would re-examine the issue when parliament reconvenes after the summer recess.

A leader in the rival Social Democratic Party (SPD), which shares power with Ms Merkel in her coalition government, also offered his support for a review of the tax - especially as the moribund German economy has turned the corner and tax revenues are rising at rates not seen for more than 15 years.

"We will closely examine the income from the solidarity tax," Mr Kauder, a parliamentary floor leader of the CDU, told theBild newspaper. Bild has led a campaign to eliminate - or at least cut - the tax, which raises €11bn (£7.4bn) a year. An opinion poll by the Forsa institute found that 67 per cent of taxpayers want the solidarity tax abolished.

"Before we cut taxes in general, we should sharply reduce or eliminate the soli," said Joachim Poss, the deputy leader of the SPD. "The year 2012 could be the right moment for that."

The proposals to reduce or eliminate the tax met with immediate protest from the five eastern states, which say a lot still needs to be done to rebuild the former Communist East and acheive parity with the West. "As long as the federal government keeps having to borrow money, I don't see any sensible reason why any tax cuts at all should be contemplated," said Wolfgang Böhmer, the state premier of Saxony-Anhalt.

History is probably on the side of those wishing to keep it, simply because reform of the system rarely seems to happen.

Ten per cent of the world's taxation literature refers to the German tax system. There are 118 laws, 185 forms, 418 exceptions and 96,000 regulations, with one single legal comment on taxation alone covering 2,671 pages.

The administration of the German tax laws runs to a spine-numbing 28,000 pages and administrating it costs €23.7bn a year - approximately 2.5 per cent of the total amount of income tax yielded annually.

With such a magnificent and costly bureaucracy to maintain, the opponents of the soli tax fear it will be around to haunt their children and grandchildren as much as it does them.